Read this if you are not saving enough

Read this if you are not saving enough


ARE Malaysians saving enough for retirement?

Let’s find out by taking a look at some survey findings conducted by HSBC in their The Future of Retirement: A New Reality 2013 report as well as the average Employees Provident Fund (EPF) savings per active member across various age groups.

The survey findings presented by HSBC’s report is based on the views of over 1,000 respondents in Malaysia. Below are some of the key findings from the survey:

Not preparing adequately for retirement

One of the questions asked in the survey was whether respondents thought they were saving enough or at all for their retirement. Looking at Chart 1, 53% of them are not preparing adequately or at all for a better retirement, while only 12% confidently believe that they are more than adequately prepared.

Chart 1

Chart1 first article

Source: HSBC’s The Future of Retirement: A New Reality 2013

Retirement savings run out after 12 years

Respondents were also asked how long they expected their retirement and retirement savings to last. On average, they expect their retirement to last for 17 years, but their retirement savings to only last for 12 years.

Besides that, they were also asked how much they thought they needed to retire comfortably and their answer was 81% of their current income is needed to have a comfortable retirement.

Not saving because of cost of living

Some of the reasons given by respondents who have yet to save for their retirement were the cost of day-to-day living (50%), the belief that they are saving or investing in a different way (30%), they never thought about it (27%) and thought that retirement was too far away for them to start saving (21%).

Crisis, buying a house affects ability to save

About 42% of respondents are likely to use their retirement savings to handle unforeseen crises although 54% would likely use other savings and investments. Apart from that, some of the events that affect their ability to save for retirement include buying a house or paying a mortgage (48%), paying for children’s education (33%), in debt or serious financial difficulty (31%) and unemployment (31%).

Are you relying only on EPF?

Based on the Employees Provident Fund (EPF) 2013 Annual Report, the average EPF savings per active member for the 51-55 age group is RM147,057.20 (see Table 1). With the life expectancy of Malaysians for male and female at 72.5 years and 77.2 years respectively (according to the Department of Statistics Malaysia), this would mean that a Malaysian has about RM147,000 to spend over about 20 years. If your EPF savings is your sole savings for retirement, you would need to save more than the average amount given the increasing life expectancy and rising living costs.

Table 1

table 1 first article

Based on the survey findings from HSBC’s The Future of Retirement: A New Reality 2013 report and the EPF savings figures, you need to ask yourself: Are you one of those who are not saving adequately for a comfortable retirement? Are your EPF savings your only source of retirement income?

If your answers are yes, then it is high time you started thinking of saving up for your golden years.

Private retirement scheme

Realising the importance of saving for a better retirement is crucial but it should not stop there. A lot can be done in terms of actual preparedness. To that end, the Securities Commission Malaysia (SC) has taken steps to reform the private pension framework in the country in order to offer more avenues to individuals to accumulate adequate retirement savings.

Enter the Private Retirement Scheme (PRS).

PRS is an investment scheme that facilitates the accumulation of retirement savings through voluntary contributions and is designed to complement EPF. Individuals who are 18 years old and older can contribute to PRS.

You can decide from at least three core funds to invest from each PRS provider, that is conservative, moderate and growth funds depending on your risk appetite, goals and investment needs.

PRS offers individuals the flexibility to invest and switch between funds according to their investment needs and risk appetite. Apart from that, individuals can invest as little as RM100 per fund while subsequent investment is only RM50 per fund. PRS also offers individuals the income tax relief of up to RM3,000 per year of assessment based on their contributions to PRS for 10 years commencing 2012.

This article by Fundsupermart.com Malaysia first appeared on the Fundsupermart.com website.

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